Experts prove link between debt and depression - but home loans may be exception

by Mackenzie McCarty22 Jan 2013

The Financial Security Project at Boston University has published research saying that, for every 10% increase in the dollar amount of a person’s debt, his or her depressive symptoms increase by 14% - but home loans may be an exception.

Lawrence Berger, an associate professor of social work at the University of Wisconsin in Madison, says there’s ‘good debt and bad debt’ when it comes to psychology and emotional health.

“To be clear, having debt does not lead to full-blown clinical depression.  But it does trigger the garden variety blues that most people experience.  Symptoms vary from losing one’s appetite or being unable to shake the blues to feeling lonely.”

The more severe psychological effects were shown to come from short-term debt, such as debt that comes from credit cards, overdue bills and short term loans. Long term debt, also described as "good debt" – such as home loans – was not found to cause a similar effect.

However, the Financial Security Project report says there is an important connection between the two.

“While the subject isn’t part of Berger’s research, short-term credit card debt can also be an obstacle to other long-term goals, such as saving for retirement or getting a mortgage.”

During a presentation late last year, Berger reportedly said short-term debt is associated with increases in depressive symptoms.

“People who can afford to pay long-term debt are less likely to get depressed.”

Researchers also failed to take into account the hardship caused by falling behind on mortgage repayments or other causes of mortgage-related stress.